Cosworth sale aids VW in Rolls fight

Click to follow
The Independent Online
THE GERMAN car maker Volkswagen yesterday strengthened its hand in the bid battle for Rolls-Royce Motor Cars by clinching a deal to buy Cosworth, the company that supplies engines to the luxury car maker, for pounds 120m in cash.

The deal with Vickers, the parent company of Cosworth and Rolls-Royce, came hours ahead of a shareholders meeting today to approve the pounds 430m sale of Rolls-Royce to VW.

Last night the likelihood of a rival bid emerging for Rolls-Royce from Crewe Motors, a consortium of enthusiasts, appeared to have faded away.

Cosworth currently manufactures the V8 engine for the two-door Bentley and would become the supplier of V12 engines for the new Rolls-Royce models, the Silver Seraph and the Bentley Arnage, if the VW takeover goes through. Cosworth would also supply high-performance engines for the VW subsidiary Audi.

BMW, which has been vying with VW for control of Rolls-Royce, has said it will end its contract to supply engines for the two models if Rolls- Royce falls to its German rival.

VW has pledged to quadruple production at Rolls-Royce's Crewe factory and invest at least pounds 300m over the next five years. The deal to buy Cosworth would take VW's total outlay to almost pounds 600m.

Northampton-based Cosworth employs 1,200 workers and made profits of pounds 6m on sales of pounds 117m last year. Apart from Rolls-Royce, it supplies engines to three Formula One teams, including Ford-Tyrrell, and engines for Ford rally cars. It also makes cylinder heads for the Jaguar XK8 and engine components for Ford and Perkins.

Sir Colin Chandler, the chairman of Vickers, described the Cosworth deal as "excellent news for all concerned" and said it underlined the case for shareholders to approve the sale of Rolls-Royce to VW. The sale of Cosworth to VW is conditional upon its bid for Rolls-Royce being approved.

The two deals will leave Vickers with just its Challenger tank defence division and a marine propulsion business. Last year these contributed operating profits of pounds 48m on sales of pounds 640m. Group profits were pounds 78m on turnover of pounds 1.1bn.

Michael Shrimpton, the head of Crewe Motors, was maintaining yesterday that its intention was to put a formal bid on the table before Vickers shareholders assemble at 10am this morning to vote on VW's offer. Analysts believe its chances of pulling off a successful bid are negligible.